With absorption of landlord-held office stock set to remain negative for the foreseeable future, we continue to expect vacancy rates to climb and rents to fall in all six major office markets over the next few years. That will be particularly pronounced in New York City and San Francisco, owing to more expensive rents and high shares of tech workers in both metros, as well as a large development pipeline in NYC. Boston will perform a little better thanks to its life sciences exposure, with average annual total returns of around 3% in the 2021-25 period. All three of those metros will underperform the national office average, whereas Chicago, LA and Washington D.C. are forecast to outperform. And there will be little to separate LA and D.C. over the next five years, with the former supported by a recovering film and TV sector and the latter helped by its large public sector exposure.
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